What is money laundering and how does it work?

The movement of illicit funds through the global financial system represents a foundational threat to national and economic security. This process, while complex in execution, is built on a simple and methodical framework.

Money laundering is the critical process of disguising the illegal origin of criminal proceeds. It allows illicit funds to enter the legitimate economy, empowering and enriching dangerous organizations. The methodology typically follows three distinct but often overlapping stages to achieve this goal. Understanding this structure is essential for recognizing and interdicting these financial operations.

Financial crimes are not victimless; they are the lifeblood of transnational criminal and terrorist networks. Following the money trail is often the most effective way to dismantle an entire criminal operation from the top down. Every interdiction at any stage of the process directly degrades their operational capabilities and funding.